The proposed research will contribute to an increased understanding about how payment mechanisms influence both the treatment of psychiatric patients and decisions to discharge them to other institutional settings. In addition, the responsiveness of the treatment of psychiatric patients to financial incentives will be compared with that of patients with selected medical diagnoses. Specifically, using 3 years of data from the National Hospital Discharge Survey, data from a special 1981 NIMH/AHA Survey, and 1984 data from the Commission of Professional and Hospital Activities, the research will investigate how differences in the structure of the Medicaid program with respect to: (1) limits on the number of days it will pay for, (2) the implementation of prospective payment rates for hospitals and (3) utilization review requirements affects the hospital length of stay of particular groups of nonaged Medicaid patients and their probability of being discharged to other institutional settings. Patients to be studied include all patients with a psychiatric diagnosis as well as a select group of medical diagnoses. A general model of the factors that affect a patient's length of stay and discharge destination will be developed. The data will be analyzed using multivariate statistical techniques with particular use of ordinary least squares as well as probit and logit regression analysis. The policy implications of the findings will be discussed.